Madhya Pradesh reluctant to sign PPAs for higher winning bids

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Madhya Pradesh has yet to sign power purchase agreements with at least two of the winning project developers from its solar auction, because they are asking for a higher tariff than the lowest winning bidder, according to consultancy firm Bridge to India.

Project allocations after Madhya Pradesh’s solar auction in July have slowed down after it emerged the state is reluctant to sign PPAs with winning project developers such as Hero Future Energies for its 38MW allocation and Renew Power for its 51MW allocation. Bridge to India reported that this is because the two companies had winning bids that were “materially higher” than the lowest bid of INR5.05 (US$0.080) /kWh from SkyPower Southeast Asia Holdings, which is also the lowest ever winning bid for solar in India.

Furthermore, while SkyPower has been issued 'letters of interest', the other companies have not yet received them.

PV Tech discussed the concerns around the low winning prices in the recent state auctions of Madhya Pradesh, Telangana and Punjab and issues with the ensuing project allocation, in an interview with the founder and managing director of Bridge to India Tobias Engelmeier, published today.

Engelmeier said that Madhya Pradesh threatening not to sign PPAs, on the basis of cost, completely changes the nature of the auction game and holds all project developers in the market hostage to the lowest bidder.

It was also reported that there is some confusion in the Telangana project allocations where the bid process at sub-station level has resulted in some developers with less competitive bids still being allocated capacity ahead of lower bidders.

The Telangana bidding is held around specific substations, which means that a developer has to own land near that substation to be able to transport power to it. This means that if very few players own land that can be used for solar around a specific substation, the auction becomes less competitive and allows the landowners higher margins than in more competitive situations.

Bridge to India warned that abrupt reversals in state solar policies had damaged investor confidence in the past. For example Chhattisgarh changed its project allocation criteria after holding its auction and Bihar failed to announce results after its bidding process. Meanwhile, Tamil Nadu cancelled its auction several times before deciding to allocate projects with a fixed tariff.

Finally, the consultancy said that for India to reach its 100GW solar by 2022 target India’s state allocations will need to be a bigger demand driver than the country’s central allocations.

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